Blockchain, Energy & Asia: Powering the Market of the Future
The blockchain promise has led many to believe that its disruptive potential is akin to that of the Internet. While this conjecture has yet to be proven, the technology shows impressive potential to improve operations in complex industries managing disparate participants. The highly complex global power sector, is among the key targets for blockchain’s disruption.
While will not likely see a complete industry overhaul via blockchain, if applied strategically and coupled with other dynamic technologies, it may indeed open up entirely new markets for the future power sector. It’s even possible this future power sector will be driven by rapidly growing economies, enabling them to leapfrog traditional power infrastructure by applying digital technologies in a totally decentralized manner. And with 50% of the projected USD $11.4 trillion invested in new power generation through 2050 projected to be in Asia, the region is ripe for disruption.
Asian markets coming online…
Three times as many people have mobile phone subscriptions — about 400 million — than access to reliable electricity — about 107 million in the ASEAN region. This phenomenon exists because wireless telecommunication allowed countries to leapfrog expensive industrial architecture in exchange for cellular towers and accessible handsets. And with the increasing consumer appetite for electricity market liberalization, new investment opportunities and business models are likely to arise. This means that the potential for blockchain-based applications that are enabled by mobile tech, in theory, can connect the rest of the region faster and most cost-effectively, than the time needed to build power infrastructure. This potential is seen in the rapid uptake of blockchain technology, with more than 189 companies in the clean energy space using blockchain globally. By the end of 2018, upwards of USD $500 million invested, and expecting to skyrocket to USD $18 billion by 2025. While the adoption of blockchain is seen on a larger scale in the developed West, greater Asia is beginning to see the trend adopted to support digitalization in increasingly decentralized power infrastructure.
The list below explores some of the ways we’re seeing blockchain disrupt energy and the key innovators in the Asian market:
Financing and Incentivizing New Developments
Renewable energy adoption and innovation has traditionally come with a cost-prohibitive price tag that excluded the majority of capital markets from participation. Developers and off-takers in many emerging markets cannot meet the stringent accreditation requirements for international climate funds or lenders. The progressive companies below are combining the decentralized nature of cryptocurrency and the incentive of financial rewards to stimulate green energy development and open up the arena to non-institutional investors. Crowd-funding and Security Token Offerings are now being used as a way to raise capital for infrastructure, with tokens representing either decentralized asset ownership or property rights to future discounted electricity. This emerging project financing mechanism democratizes investment, along with providing transparency and credibility to higher risk markets.
Leading Financing and Tokenization Projects in Asia
Positive Energy provides institutional investors with access to diversified renewable energy assets offering predictable returns, standardizing due diligence processes and connecting investors to developers. The company uses a blockchain-based platform to digitize and simplify due diligence processes, reducing the high transaction costs associated with financing small and mid-sized renewable energy projects.
EtainPower is a renewable energy financing and trading ecosystem combining blockchain and artificial intelligence solutions. Their architecture tokenizes global renewable energy assets to streamline and simply trading. EtainPower is headquartered in Singapore but has an international team identifying deployment opportunities in other emerging markets.
Allinfra democratizes infrastructure finance, allowing accredited individuals to invest directly in the highest quality infrastructure assets globally. This brings the financial benefit of this low risk market segment to the masses and provides an alternative source of financing to qualified infrastructure asset developers, owners and operators.
Peer-to-peer Trading and Microgrids
Legacy utility systems and power grids are famous for their inefficiencies due to their centralized nature. Though until the advent of the blockchain and the technology improvements enabling cost-effective green energy development, there was no other option for consumers wishing to remain electrified. Now that home batteries and solar panels are approaching ubiquity, many consumers are storing energy surpluses that they can monetize by sharing with neighbours. The phenomenon of the microgrid and peer-to-peer trading has become a popular choice among proactive consumers, leading to the development of myriad of new startups on a global scale. And in remote regions in Asia where electrification has yet to be achieved, community-wide microgrids powered by solar can deliver the power connections necessary to elevate these regions into economic participation.
Leading Microgrid Startups in Asia
Electrify.asia is one of the first retail energy markets in Asia, having facilitated over 60GWh of energy transactions. As an improvement from the existing marketplace business in Singapore, their new Marketplace 2.0 will allow anyone to source energy from commercial energy suppliers or buy directly from a private producer via Electrify’s peer-to-peer trading platform.
Australian company Power Ledger builds peer-to-peer energy trading networks with transactions mediated on the blockchain. Power Ledger enables commercial operation of microgrids with Thai energy utility BCPG, Japanese utility KEPCO, and now moving into India. Their projects enable households and businesses to buy and sell renewable energy at affordable rates on a digital marketplace.
Energo Labs is based in Shanghai, but operates globally. They are designing Decentralized Autonomous Energy (DAE) communities by leveraging blockchain solutions built for energy markets. They aim to power a framework for peer-to-peer microgrids where small energy producers can exchange energy with their neighbors.
Energy Infrastructure and Balancing the Grid
On a more established state grid, blockchain can facilitate real-time data monitoring of supply and demand data to help achieve a higher uptake of renewables. Whenever more variable renewable energy is generated than needed, smart contracts could be used to ensure that excess electricity is diverted into storage automatically. In more remote regions, Virtual Power Plants have emerged as an aggregator of individual micro projects through a central IT control system, helping to establish data transfer between myriad of power plants participating in a network. Once linked together, the central control system can monitor, forecast, and dispatch the networked units, allowing energy traders to use live data to better forecast and trade renewable energies. This helps to reduce consumer energy demands during peak times and provide more renewable energy to specific areas in need, as well as help balance power loads, identifying idle power from multiple distributed power sources that may be reallocated.
Leading Infrastructure Startups in Asia
Energy Web Foundation has developed an open-source, scalable blockchain platform tailored specifically for the energy sector. They are among the most publicly visible of the blockchain disruptors, with various tools that include: an automated grid management mechanism (D3A tool), a renewable energy credit marketplace called EW Origin, power station equipped blockchain sensors to transmit live data directly into the blockchain, and a platform for third-party affiliates to develop propriety energy products on top of.
Environmental Attribute Certificates
Despite being designed to offer liquidity to projects as tradeable financial instruments, EACs and carbon credits have traditionally encumbered by high verification costs and difficulties tracking compliance and authenticity, leading to a lack of trust and near complete illiquidity in voluntary markets. The disintermediated and transparent nature of the blockchain effectively eliminates the need for a centralized verification entity, reducing costs and allowing small energy producers who have typically been excluded from this vertical, opening up an international trading market for green energy certificates. Given properly calibrated and installed smart energy meters, blockchain could ensure the tracking of electricity in real time by authenticating renewables at the point of origin and avoiding double counting. The following innovative startups are transforming the EAC and carbon credit market:
Leading EAC Projects in Asia
SP Group has built a Southeast Asia-focused REC certifying and trading platform, whereby local buyers and sellers are algorithmically matched. To date, they have announced partnerships with City Developments Limited, DBS Bank, in agreement to purchase the future RECs from Cleantech Solar Asia, LYS Energy Solutions and Katoen Natie Singapore.
Swytch incentivizes the support of green initiatives with a token system that rewards sustainable actions from users. Unlike other incentive programs, Swytch does not offer tokens on a 1 MWh: 1 token ratio. They instead use an ‘Oracle’ to verify real world environmental occurrences and submits the information to the blockchain, allocating a proportional number of tokens to the environmental and economic impact of the renewable energy produced.
Reneum is a digital EAC platform leveraging the decentralized ledger technology of the blockchain to facilitate certification, issuance, and transactions. By connecting the smart meters of renewable energy producers registered to our platform directly to the blockchain, Reneum verifies the authenticity of the energy source, ensuring the provenance of the energy is validated before it enters the market. Reneum tokens may then be purchased for fiat currency by a corporate buyer, and retired from circulation directly in the platform to ensure tracking compliance.